Delnote Constructions receivers sued by FEG

The Department of Employment’s Active Creditor Unit (ACU) unit continues to fish for receivers fattened on circulating assets and an amended statement of claim filed last month in the Federal Court shows the ACU’s litigators have Delnote Constructions receivers Riad Tayeh and David Solomons hooked.

The ACU is seeking $323,661.74c from the dVT pair in relation to their work as receivers of Delnote Constructions Pty Limited. The company’s liquidators – Sule Arnautovic and Glenn Crisp from Jirsch Sutherland – have so far returned to the Department of Employment $173,253.54c out of a total $496, 915.28c paid to cover employee entitlements doled out under the Commonwealth’s Fair Entitlements Guarantee (FEG) scheme. The receivers have returned nil and deny they owe FEG a cent.

In a nutshell the allegations are that Tayeh and Solomons have failed to make any payments in respect of employee entitlements or FEG payments out of the proceeds of recovered debts that the ACU submits were the subject of a circulating security interest created when the company’s director entered into a General Security agreement and Deed of Loan with invoice financing outfit, Hermes Capital Australia.

Hermes, which is run by ex-Turnaround Management Association (TMA) chairman Nick Samios appointed the receivers on November 22, 2014, a day after Arnautovic and Crisp were appointed liquidators via a creditors voluntary winding up. The GSA and loan deed entered into between Hermes and Delnote’s director Hermann Janzon was executed on September 19.

Like a great many of the proceedings being commenced by ACU under the direction of Henry Carr and Janine Cole, questions of liability hinge on timing and the Delnote matter is no different.

The ACU says that as at their appointment on November 22, 2014 the receivers took possession or assumed control of the property of Delnote, which included debts owed and choses of action.

Tayeh and Solomons say not so. In their amended defence they maintain that despite the appointment date they “did not take possession or assume control of the property of Delnote at the “Appointment Date” but rather this occurred from Monday 1 December 2014.”

This has a critical bearing on the status of various debts owed to Delnote and the choses of action those debts engendered. Under the September 19 agreements Hermes’ had provided invoice financing that had purportedly enabled the receivers to trade on and recover many of the debts, which they did by engaging ex-dVT manager Justin Ward and his business advisory Macleay Partners. The ACU says that the fact they engaged Ward and he recovered the debts contradicts the receivers’ claim that not all the debts and choses of action that have been identified came under their control.

Then there’s the questions around debts that found their way back to Hermes, which the receivers insist were “not purchased or acquired by, assigned or transferred to Hermes pursuant to the terms of the invoice facility entered into between Hermes and Delnote or the Security Agreement.” Hermes however is not a party to the proceedings and the ACU’s claim makes no allegation of wrongdoing against it.

The receivers also deny they permitted Hermes to collect and retain the proceeds of various debts and assert that other debts were assigned to Hermes by Delnote’s director before the relevant date. The ACU says that as those assignments took place after their appointment on November 23, 2014 the director had no authority to deal with the company’s assets.

The figure sought from Tayeh and Solomon is inflated by interest but at this stage of the proceedings the evidence is still being collected, a fact which may explain why the receivers’ defence is peppered with the line that “The Defendants do not know and therefore cannot admit the allegations …..”

Neither the receivers or Carr responded to requests for comment, and only when the anticipated trial concludes will we know if the DVT principals are destined to be gaffed and sashimied for the benefit of the Australian taxpayer or will have spat hooks that never had a hope of holding them. In the meantime SiN recommends: ’Tis Better To FEG, Than To Receiver

About the Author

Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

1 Commenton "Delnote Constructions receivers sued by FEG"

It may be that I am a simple lawyer – Why isn’t the money provided by the FEG for the benefit of employees for which a statutory right of subrogation arises money that is held on trust for the employees concerned and not part of the “property” of the company concerned? possibly subject to some form of processing charge I would have thought it would have to be paid to the employees gross and not used for payment of remuneration or satisfaction of the secured creditor.